Back in 2008, Perfect Audience's Brad Flora started a Chicago-specific social news website called Windy Citizen. Though the audience grew, the ad revenue lagged which led to an investigation by Flora into the world of dynamic creative optimization (DCO). Soon, with a little help from tech incubator Y Combinator among others, his growing startup created its very own HTML5 ad unit creation software serving the ‘long tail’ market.

Though advertisers were impressed with the software, placing the right ad, at the right time, in the right place, and in front of the right person was more important. Enter retargeting and Facebook Exchange – and the creation of Perfect Audience’s self-serve product.

AdExchanger spoke to Flora, who is CEO and Co-Founder of Perfect Audience, about his startup and its product line.

AdExchanger: Can you talk about how Y Combinator impacted your thinking?

BRAD FLORA: Y Combinator encouraged us to reorient our thinking around ‘a marketplace’ which led us to retargeting. Over the last year, we've been running retargeting campaigns for hundreds of advertisers, and over the last six months, we've started building a self-service solution based on everything we learned the campaigns we ran for people.

During this time, Facebook announced that it was opening up the Facebook Exchange. We ran some tests through FBX and were impressed with the performance. We saw it as a "blue ocean" opportunity and focused the product on FBX. Recently, we announced the first completely turnkey self-service Facebook retargeting platform.

Why do you see it as a "blue ocean" opportunity? Some might say that it's just more of the same.

One of the factors that we deal with as a start-up is there is a lot of "chicken and egg" problems. For example, we have hundreds of advertisers, but other companies have thousands of advertisers and much larger spend [running through their platform] than we have landed. It's clear that people have invested a lot of time and money into building inventory relationships that we're still developing. But, in the Facebook situation, it is much more egalitarian. Everyone has access to the same inventory - FBX.

Are you a Facebook Ad API partner or do you work with one of the DSP's to give you access to Facebook Exchange?

We're talking to Facebook, but we are working through AppNexus right now and they have been a great partner. The economics work out wonderfully so that it's not an issue. We looked at it as a solved problem, the bidding side of things and AppNexus is able to give us access to it so that we don’t end up having to supporting any extra costs. That has enabled us to bring this product to market a lot faster.

What other ways are you going to be differentiating from retargeters such as an AdRoll?

We're focused on self-service - the ease of the user experience and core account management actions that come up again and again. With something like re-targeting, there's five or six questions that an advertiser addresses repeatedly such as reach, "When should I update my creative?," and so on. Anyone can use our platform in a scalable way and they don't have to spend a lot of time on the phone to do it.

What is the most popular use case that you envision either now or in the next few months for using your self-serve tool?

Right now, the most popular use case, and the one that we spent all week responding to, is someone who wants to get started with Facebook Exchange now. People can sign up and have a campaign running in minutes.

Can you talk about how the self-server advertiser implements your solution?

Once a user signs up, they create a site object and get a tag. They put that tag on their website and then they can create as many audience segments as they like using our software. We have a Javascript API. Folks are using it to create lists based on user actions in the browser, but we also have easy ways to make segments based on query strings.

Our campaign builder looks like the Facebook ad campaign maker, something very familiar to everybody. Visually, you get real-time feedback as you make the ad. It's easy and straightforward to put a campaign together.

Hypothetically, let’s say I sell baseball hats online, can you take me through how the segmentation works?

Let's say you have an online store that gets 5,000 to 50,000 visitors a day. After signing up for Perfect Audience, you get a tag, put it in the source code of your site and then you come back into our app and you make some audience segments. You make one for people that have visited their cart, you make another for people that have checked out and actually made a purchase, and then you make a conversion goal where you pass the revenue amount for the order and the order ID for the orders so you can double check that attribution.

Then, you would make the ad campaign and say, "Okay I want to show this ad for my business featuring some product images," maybe make 10 of those and tell Perfect Audience that you want to show these ten ads in rotation to people who have visited their cart, but not bought anything yet. After they make the purchase, let's exclude them from the targeting and we're going to track that conversion in our system and be able to track how much was spent and what order it was, so that we can ‘sell’ attribution for the site.

What is intriguing about Facebook Exchange, in particular, for advertisers?

There are things that we've learned in the last couple of months as we've dived into Facebook Exchange. On the Web, when you run any sort of programmatic campaign, there are some risk factors. Various DSPs (demand-side platforms) have different ways of mitigating these risk factors, but there is an inventory risk. No matter how well the sites in the different exchanges are screened and no matter how carefully the different ad exchanges look out for bad actors, there are a lot of crummy sites in the ad exchanges right now. There are a lot of sites where all the ads are below-the-fold or have 50 ad units on the page - it's very wild west. It's easy to spend money on bad placements on the ad exchanges. That is a fact.

On Facebook, there's really no issue like that. The ads appear in a controlled environment and are almost always above the fold. You are not paying for impressions that are not viewed anymore. All of the discussion in the digital ad industry websites about viewability is a moot point with Facebook.

Secondly, there is creative risk. What if you are showing the wrong message to certain audiences? What if your ads are bad? It's easy to make Facebook ads that solve those challenges with a lot less effort.

Finally, Facebook inventory is a lot cheaper so you can get a lot more reach for a lot less money and that might be a factor of Facebook playing with the pricing for now. It's a sweet deal for people.

Any plans to retarget through other exchanges and map all this together?

Right now people can also use us for web retargeting. We have folks that are running campaigns across the web and across Facebook. From a business strategy standpoint, once we saw the ROI that the Facebook Exchange campaigns were delivering and also just looking at where the excitement is right now, it made sense to focus on that and to bring that to the forefront in the product. That's what we're all about, but a lot of people they get in, they get their Facebook campaign signed up then they see they can also do the web retargeting, too.

How do you guys make money on this?

We charge a margin, so share-of-spend. We have no maintenance fees. When we launched this a [couple of] weeks ago, we expected our sweet spot to be small and medium sized businesses, but we've been shocked at some of the big guys that are starting to work with us now.

What is the size of the team and do you have plans to grow it?

There's five of us right now. We've got a two-person product team and then a two-person, sales and support, ad ops team. And then I'm on both teams, based in California, and Mountain View and Chicago. Yes, we definitely have plans to grow it. We have been interviewing people for a while, we are making some key hires very soon, on both sides.